from the who-cares-about-quality dept

We've discussed numerous times that as the Internet video revolution accelerates, the cable and broadcast industry's response has predominantly been to double down on bad ideas in the false belief that they can nurse a dying cash cow indefinitely. Netflix nibbling away at your subscriber totals? Continue to glibly impose bi-annual rate hikes. Amazon Prime Video eroding your customer base? How about we increase the hourly advertising load! Similarly, cable industry efforts at "innovative" viewing options (like TV Everywhere) are often more about giving the impression of innovation than actually innovating.

This has been going on for a while, and as complaints in this Reddit thread attest, another favorite tactic has been to heavily edit some programs for the same purpose. Fans of particularly popular programs tend to be the first to notice that their favorite content is now edited or accelerated, which may drive them to look elsewhere for a better quality version of that product (piracy, Netflix). Behold, even many executives in the cable and broadcast industry appear to be aware that adding more ads and degrading the quality of your product might not be the greatest idea for an industry at the cusp of a major competitive sea change:

"It is important for us to consider the effect this is having on the viewer experience,” said Jackie Kulesza, executive vice president and director of video at Starcom USA. “We want to ensure our message is seen by receptive viewers."..."They are trying to deal with a problem in a way that is making the problem bigger,” said Chris Geraci, president of national broadcast at media buyer Omnicom Media Group of the practice of increasing the commercial loads to make up for declining ratings."

Except the cable and broadcast industry has repeatedly shown it's not really worried about the "viewer experience." Why? Because for all of the bitching the public does about their cable company and its historically abysmal customer service, the industry knows the vast, vast majority continue to pay them an arm and a leg for bloated bundles of miserable programming that barely gets watched. Even as cord cutting accelerates, the industry isn't worried; plan B is to abuse its monopoly over the broadband last mile to ramp up deployment of broadband caps, recouping their lost pound of flesh via broadband overage fees.

I'll get to stage three later, but here in stage two, the industry remains very focused on doubling down on very bad ideas in the hopes an increasingly annoyed customer base won't notice. As we've been noting, the viewership for both cable and broadcast TV is dropping, particularly in segments like kids programming, where parents are finding better value (and fewer ads) via services like Netflix. What's cable's response to this growing threat? Start shoving more and more ads into each viewing hour:

"Beset by declines in audience, a majority of U.S. cable networks stuffed more commercials onto their air in the fourth quarter, with Viacom boosting its ad load by 13% across its cable networks; A+E Networks increasing the number of commercials it runs by 10%; and Discovery Communications adding 9% more TV spots, according to research released Wednesday by independent analyst Michael Nathanson. On the broadcast side, Fox raised the number of spots it aired by 15% in the quarter, Nathanson said, while ABC and CBS reduced theirs by 2% and NBC cut its by 6%."

Of course, cable and broadcast companies can get away with this because -- despite all the grumbling about cable companies -- the vast majority of consumers continue to pay an arm and a leg for vast bundles of cable content that they barely watch. By the time the numbers start to veer more sharply toward cord-cutting, many of these cable, phone or telco TV operators are going to be well behind the Netflix and Amazon eight ball. That will bring us to phase three, where cable and broadcast companies that refused to adapt will turn to their stranglehold over the broadband last mile, and start extracting their pound of flesh via usage caps.

from the transparently-non-transparent dept

For many, many years, plenty of people have complained about hidden fees and bogus promotional rates offered by various broadband companies. It appears that Jeremy Zielinski has had enough. He's actually sued Time Warner Cable in NY for "deceptive acts and practices" and "false advertising." Specifically, he signed up for Time Warner Cable at a promotional $34.99/month package, only to discover his first bill was for $94.45. The $34.99 had magically morphed into $39.99 plus a $5.99 "internet modem lease" fee and a $47.99 installation fee -- all of which he insists were never mentioned anywhere in the original offer. The modem lease and install fees are fairly common these days -- and it's ridiculous but they're the kinds of things that people should absolutely clarify before signing up for new internet service. The wrong promotional fee, though, seems really questionable. Zielinski then had a rather typical customer service experience with a big broadband player:

On or about the next day, Plaintiff called the defendant's customer service number
to complain about the overbilling. Plaintiff specifically informed TWC that the prices and
services billed for were neither advertised, explained, nor agreed to. After waiting on hold for
some time, a representative claimed that the $34.99 was a "promotional price" that should not
have been on the website anymore and that the "modem lease" fee and installation fee were
"standard" and could not be taken off. Inexplicably, the representative nevertheless agreed to
remove the $47.99 "Internet, Install fee" from the bill.

A few calls later, TWC promised to lower the price to the advertised $34.99, but did not (of course). After many more complaints, TWC did temporarily lower his bill to $19.99 (plus the "modem lease fee").

Zielinski also notes some other practices that he suggests are unfair or deceptive, such as leasing certain modems that the company insists will not work on its system if you buy them (thus pressuring people into the lease fee):

Another page on TWC's site, taken down at an unknown point in the last few
months, contained a list of which modems TWC will "approve" if owned by a consumer and
which modems TWC will "lease" to consumers. The list of modems which are compatible with
its services is substantially larger than the "approved" list. Many modems which TWC falsely
claims "will not work" because they are not on the "approved" list are the very same ones that
TWC "leases" to consumers and charges them non-advertised fees for. Exhibit H.

For some modems, the only distinction between whether consumers can use it to
receive TWC services is whether TWC or the consumer owns the modem. If the consumer owns
it, TWC will not allow the consumer to use it, but if TWC owns it—and can charge the consumer
a monthly "modem lease" fee for it—the modem is perfectly acceptable to TWC. There is no
legitimate technological reason for this distinction.

Many of the modems which TWC falsely claims "will not work" with its services
are substantially cheaper than the ones on the "approved" list. TWC's false statements about
which modems are compatible with its services, and its refusal to "approve" consumer-owned
modems which are actually compatible with its network, have no legitimate technological
justification, and are intended to deter consumers from purchasing compatible modems and to
coerce them into paying exorbitant and unnecessary "modem lease" fees.

He also claims that Time Warner Cable sold him a speed upgrade, which was never actually delivered, though the company continued to bill him for it.

Despite TWC's email, Plaintiff observed that his upload and download speeds did
not seem to have improved in any noticeable way. He began conducting a series of speed tests
and discovered that his upstream and downstream speeds were the same as they were before the
upgrade, even though he was now being charged $10 per month more for TWC services.

Plaintiff then contacted TWC customer service using its online chat portal and
spoke with several representatives attempting to resolve the problem.

The first representative revealed after checking Plaintiff's account that the modem
TWC had previously provided was not compatible with the higher speeds. According to that
representative, in order to receive the services advertised, Plaintiff would have to travel at his
own expense to the local TWC office and swap out the modem for a newer one.

The second representative proposed the preposterous solution of giving Plaintiff a
one-day credit for the services TWC was apparently incapable of providing, then canceling the
upgrade and going back to the lower speeds.

When Plaintiff requested to speak to a third representative, that person initially
said the first representative was wrong and that the modem was compatible with a "Turbo"
Internet access line, then after a speed test showed the same sub-advertised performance it had a
few minutes before, changed his mind and said the modem was not compatible.

One interesting note in all of this: early on, Zielinski made the decision to pro-actively opt-out of TWC's mandatory arbitration clause, which most customers just accept, and which would significantly limit the ability of most users to go to court. Here's one of the exhibits in his lawsuit filing:

Companies like Time Warner Cable have been able to get away with these sorts of questionable and non-transparent practices for ages. If I had to guess, I'd imagine that this lawsuit won't get very far in court, but it's still interesting to see someone fighting back...

from the that'll-work dept

While cord cutting has been a small but important phenomenon for some time now, there are indications that the trend may be poised to accelerate in 2015 when a bevy of new live Internet video streaming options from HBO, Showtime, Sony, Dish and Verizon emerge. Cord cutting continued at a slow drip last quarter, with traditional pay TV operators losing a net 179,000 customers. Satellite companies Dish and DirecTV, which used to be immune to these defections, are no longer so; DirecTV lost 28,000 customers last quarter -- the first time they lost customers during Q3 in the history of the company.

Even industry analysts, who historically have ridiculed cord cutting as a hallucinated phenomenon reserved only for poor nobodies, have changed their tune. With the cord cutting trend clearly established and cable customers getting annoyed by often bi-annual rate hikes, how are many cable companies responding? Why, the one-two punch of denial and raising rates, of course!

New York's Cablevision is a prime example. At one time a cutting edge company that offered some of the fastest speeds at the best prices in the industry, over the last few years the company has resorted to winking and nodding at regional competitor Verizon every time it's time to raise rates on TV and broadband services. Company chief James Dolan recently declared that offering promotional rates and trying to compete on price was a "dead end" for the company, and as a result, a recent SNL Kagan study showed how Cablevision customers paid some of the highest prices for cable anywhere.

The result? Cablevision lost 56,000 video, 23,000 broadband and 33,000 Internet voice subscribers last quarter, but saw a 3.7% jump in net revenue. So stock jocks are temporarily happy, but that's not really a sustainable way to function long term -- unless of course your long-term goal is to sell your company to Comcast. James Dolan told analysts last last week he sees the cord cutting trend but isn't really worried about it:

"I don't know that it's necessarily disruptive to us yet as a multichannel provider, but we're keeping our eye on it. Ultimately, cord-cutting and going to over-the-top is something that we do believe is going to happen, and we're preparing ourselves for it. But I think that's all I can say about it at the moment."

Why aren't cable execs like Dolan worried about Internet video disruption? Because they know that because they see even less competition on the broadband side than they do on the TV side, they can continue raising rates there (inevitably in the form of technically unnecessary usage caps) relentlessly for the foreseeable future. In other words, cable companies are going to ride the pay TV cash cow right into the ground (while providing some of the worst customer support in any industry), then when Internet video takes off, shift their focus to new and creative ways to jack up prices thanks to the lack of competition in the field.

from the you-have-absolutely-no-credibility dept

Not too surprisingly, the broadband industry isn't too happy about the White House's surprise announcement that it appears to have grown a spine and is ready to go to war over reclassifying ISPs under Title II to protect net neutrality. ISPs have repeatedly made it clear that they'd sue any effort to impose real rules, and you could barely hear oneself over the noise of deep-pocketed carriers putting their legal teams, PR firms, and myriad of paid astroturfers, policy mavens, sockpuppets, fauxcademics and think tankers on high alert. The response from this status quo chorus is about what you'd expect, with most of them breathlessly insisting that Title II will kill puppies, ruin your nice dress shirt, totally disrupt your brunch plans, and destroy the Internet as we know it.

Verizon, for one, offered a fairly predictable response, insisting that Title II would destroy the Internet as we know it. To hear Verizon tell it, Title II simply wouldn't survive a legal challenge (pro tip: to avoid a legal challenge, how about you don't sue?):

"Reclassification under Title II, which for the first time would apply 1930s-era utility regulation to the Internet, would be a radical reversal of course that would in and of itself threaten great harm to an open Internet, competition and innovation. That course will likely also face strong legal challenges and would likely not stand up in court. Moreover, this approach would be gratuitous. As all major broadband providers and their trade groups have conceded, the FCC already has sufficient authority under Section 706 to adopt rules that address any practices that threaten harm to consumers or competition, including authority to prohibit ‘paid prioritization.’ For effective, enforceable, legally sustainable net neutrality rules, the Commission should look to Section 706."

Amusingly, every time Verizon speaks on this issue they not only forget to mention that Title II governs huge swaths of their infrastructure with absolutely no ill effects (and actually some tax benefits for Verizon), but that they were the company that decided to sue over the very Section 706 rules they now profess to support. AT&T similarly ponied up a statement that first pretends that turning telecom regulators into spineless wimps is some kind of bi-partisan miracle accomplishment, then proceeds to insist that relying on a broken, bickering Congress flush with AT&T cash is the only way to move forward:

"Light-touch regulation has encouraged levels of investment unprecedented by any industry and spawned incredible innovation. Today’s action puts all of that at risk – and puts it at risk not to remedy any specific harm that has occurred. Instead, this action is designed to deal with a hypothetical problem posed by certain political groups whose objective all along has been to bring about government control of the Internet. The White House is proposing to put the Internet and our economy at risk as a result of such political pressures."

And by "political pressure," AT&T means the four million people who wrote the FCC annoyed at the fact that AT&T now gets to literally write and purchase all telecom laws. By "government control of the Internet" AT&T means regulators that actually do their job, and by "unprecedented" levels of investment AT&T's referring of course to their fixed-line network investment CAPEX that's been dropping like a stone despite fifteen years of broadband industry deregulation.

"Comcast and cable companies (along with the telcos) have led the broadband revolution, being the first to roll out America’s fastest broadband speeds across the country. As the White House itself acknowledged in its broadband report in 2013, this only happened because we were not subject to the intrusive regulatory regime designed for a different era."

"The FCC is an independent agency and it should exercise independent judgment in crafting new rules. This is truly a matter that belongs in Congress and only Congress should make a policy change of this magnitude. Congress can easily unravel the legal and jurisdictional knot that has tied up the FCC in crafting sustainable open Internet rules, without resorting to rules of the rotary-dial phone era. We urge Congress to swiftly exercise leadership of this important issue."

Because when you think about Congress, "easy," "swift," and "leadership" are certainly the very first words that jump to mind. As we've noted quite a few times now, in the absence of meaningful broadband competition (something that's not getting fixed anytime soon), Title II with forbearance is the only sensible way forward if we want neutrality rules that not only protect consumers from aggressive duopolists, but help prevent future iterations of the FCC from over-reaching. Most of the ISP claims about the impact on investment are the same tired talking points they've trotted out for every cocktail party and policy issue for the last thirty years, and they're going to need a new repertoire of scary bogeymen if they hope to keep the latest chapter in the net neutrality saga truly entertaining.

from the everybody-loses dept

We've already noted how the retransmission fee disputes between cable companies and broadcasters have grown significantly more annoying over the last few years, as broadcasters seek out higher and higher rates to prop up the unsustainable current TV ecosystem. These fights have become a master class in how to piss off your (already quite annoyed) customer base during rate negotiations, with paying TV customers being bombarded with ads, TV tickers, and a bevy of lame websites by both sides trying to direct consumer outrage toward the other guy. Customers who happen to get broadband from a TV company engaged in one of these fights have also recently started to enjoy having access to online content blocked, even if they subscribe to TV services through another operator.

While broadcasters (especially sports programmers) own the lion's share of the blame for the soaring rates, neither side is blameless. Cable operators will blame broadcasters with one breath, and in the very next hit consumers with their own assortment of higher cable modem rental fees, more expensive DVR and set top rental charges, or strange and obnoxious new below the line fees. Once both sides spend a few months publicly sniping at one another and bombarding consumers with artificial concern for soaring prices, they'll strike a confidential agreement and quite happily raise consumer rates in unison. Cable TV customers get to pay for the honor of the entire experience.

AMC has recently ramped up their use of this tactic, blasting consumers with tickers and ads not only after contract negotiations break down, but months before current contracts expire. AMC repeatedly warned viewers of the latest "The Walking Dead" episode that DirecTV wasn't bowing quite deeply enough during efforts to renew a contract expiring at year's end, and therefore consumers might lose access to their favorite content:

During the Nov. 2 premiere episode of The Walking Dead, AMC began alerting DirecTV subscribers via commercials and graphic snipes that their ability to watch cable's top series, and TV's leader among persons 18 to 49, could be compromised..."DirecTV has not engaged in meaningful negotiations with us, which leaves us to doubt whether a timely renewal is possible," (a statement declares).

Because bothering you at home during your favorite shows isn't enough, Viacom recently got the great idea to take their feud with small cable operator Suddenlink on the road, hiring actors dressed up as the Teenage Mutant Ninja Turtles to help educate kids and parents during a Charleston-area homecoming celebration:

Viacom has enlisted Nickelodeon’s Teenage Mutant Ninja Turtles to help reunite Suddenlink customers with some of the characters they might be missing since losing access to Viacom channels in early October. The turtles were scheduled to make an appearance at Capital High School’s homecoming game Friday night at University of Charleston Stadium. The move, Viacom spokesman Mark Jafar said, is intended to let area customers know the company is still thinking of them.

Of course this attempt to generate consumer outrage on the part of broadcasters only works if consumers actually miss your content, something that's only going to happen less as alternatives to cable expand. When DirecTV customers recently lost access to The Weather Channel during a contract dispute, it turned out that customers really didn't miss the channel all that much because the channel's quality had eroded substantially and many users had already shifted to getting their weather online. It's also worth noting that some small and mid-sized cable operators, unable to afford these endless rate hikess, are no longer offering cable TV and simply selling broadband.

Cable company executives spend a lot of time publicly wondering why younger cord cutters can't seem to see the incredible value in traditional cable television, oblivious to the fact that annoying paying customers goes a long way to explaining it. These are the same companies and executives who in a few years will stare dumbly at their shoes wondering how they failed to keep pace with evolution in Internet-based television, and these increasingly annoying and loud contract disputes are the last, sad gasps of a dying dinosaur.

Judge Nathan doesn't buy the "okay, the Supreme Court said we looked like a duck, so now we'll pay like a duck" argument.

To begin with, Aereo's argument suffers from the fallacy that simply because an entity
performs copyrighted works in a way similar to cable systems it must then be deemed a cable
system for all other purposes of the Copyright Act. The Supreme Court's opinion in Aereo III
avoided any such holding.

[....]

the Supreme Court in Aereo III did not imply, much less hold, that simply because an
entity performs publicly in much the same way as a CA TV system, it is necessarily a cable
system entitled to a § 111 compulsory license.... Stated simply, while all
cable systems may perform publicly, not all entities that perform publicly are necessarily cable
systems, and nothing in the Supreme Court's opinion indicates otherwise.

The court also makes quick work of Aereo's DMCA defense, noting that Aereo never even bothered to make a complete showing for how it could possibly be eligible for the DMCA's safe harbors. The judge doesn't fully grant the networks' request, but comes pretty close.

Therefore, while Plaintiffs may have a viable argument that even Aereo's fully time-shifted retransmission of Plaintiffs' copyrighted works violates Plaintiffs' public performance
right, the Court will not reach the issue at this preliminary stage of the litigation. Plaintiffs will
be held to their earlier decision, strategic or otherwise, to seek a preliminary injunction limited in
scope to enjoining retransmission of their copyrighted works while the works are still being
broadcast.

Likewise, Aereo cannot limit the scope of the preliminary injunction to anything short of
the complete airing of the broadcast despite its contention at oral argument that the Supreme
Court intended "near-live retransmission" to mean something less than a ten-minute delay. See,
e.g., 10/15/14 Tr. 27 :22-24 ("So that nothing is transmitted within ten minutes of the beginning
of the program, for example. That would be one way theoretically to handle it."). The
preliminary injunction that was before the Supreme Court contemplated enjoining retransmission
of Plaintiffs' copyrighted works while the works are still being broadcast and that is the
injunction that will issue now. The questions involving the scope of the permanent injunction
that Plaintiffs seek in this litigation can be addressed quickly, and finally, by this Court in short
order following the close of discovery. As a matter of sound case management, the Court
declines to address the broader scope question now, before the factual record is closed, and
without the benefit of fuller briefing on the matter.

In short, it's what was said at the hearing last week: the Supreme Court made it pretty clear that Aereo should die, so the judge is going to help make that happen.

from the not-looking-good dept

When the Supreme Court ruling in the Aereo case came out, we noted that beyond the bizarre "looks like a duck" test that the Supreme Court made up on the spot, it also appeared to leave open the possibility that Aereo could survive if it simply added a mere delay to its streaming. That's because a key part of the "looks like a duck" test to make Aereo's service a "public performance" was that the shows were streamed "contemporaneously." As Justice Scalia pointed out in his dissent, without any further clarification in the majority ruling, it certainly sounds like Aereo could just function as a remote DVR and be fine.

Back in the district court this week, however, the same judge who had originally ruled in Aereo's favor, now seems to believe that the Supreme Court's decision completely wiped out Aereo's chances altogether. This is the problem with these kinds of Supreme Court rulings, where they rule with a focus on one particular aspect (in this case "contemporaneous" viewing) and lower courts interpret it to mean all of Aereo was ruled illegal. This same sort of thing happened with the Grokster case, in which the Supreme Court ruled that Grokster was guilty because of its related actions that "induced" infringement, and the RIAA/MPAA and others simply assumed that the court said all file sharing is illegal.

In this case, Aereo went before Judge Alison Nathan to present it with a few different arguments over how the company could stay in business -- either by paying licenses as a cable operator or by time shifting, etc. -- and the judge didn't seem to think any option was available to the company. As the Hollywood Reporter notes, her response was:

"Just as a matter of finality, how many bites at the apple does one get?"

I would think that the answer is as many bites as is legal, no? All of the proposed alternatives by Aereo are clearly in direct response to the Supreme Court's specific "looks like a duck" ruling. Aereo isn't trying to challenge that, it's looking to work within the rules the Court established. Yet, once again, we see people taking Aereo's efforts at complying with the specific law as laid out by the courts, and interpreting it as somehow circumventing the law.

Either way, Aereo has the stigma of "lost at the Supreme Court" attached to it, and it appears that any attempted solution to actually comply with the Supreme Court's ruling will be seen as not being allowed because it's merely trying to get "another bite at the apple."

from the timing-and-details-are-everything dept

For years, plenty of people have been wondering why HBO absolutely refused to offer a standalone internet offering for cord cutters (and cord nevers), with the general response being that "the math" was against it. Basically, HBO gets a ton of money from cable, and every time new customers sign up, that's free money for HBO without having to spend anything on marketing. A standalone product may not even bring in as much money and would require HBO to do more marketing efforts on its own for the offering. Of course, as we pointed out in response to that argument, "waiting for the math to make sense" is a kind of predictor for legacy companies that wait too long to innovate and find that the future has become the present while they're still in the past.

Eventually, the timing was going to be right, and apparently HBO has decided that time is now. Or, at least, sometime next year. The company announced plans to launch a stand-alone internet offering leading to much speculation. Actual details are lacking, and there's some speculation that it might be a very different product than the current HBO Go offering. Some are saying it may actually be in coordination with another player (like Amazon or Hulu). Reading too much into at this point doesn't do much good.

Of course, this has also led to some speculation that it may increase people cutting the cord -- and that's likely true for the segment of the population that has cable for HBO (duh) and not for sports (a bigger driver). However, the real point here may be that where HBO goes, others are likely to follow -- including sports.

HBO's decoupling with cable TV may not single-handedly change the cable TV market, but it's a sign of a much larger shift that started long before and is now dragging HBO along with it. The traditional cable TV market has been ripe for disruption for quite some time. This is just a single mile marker in an ongoing process.

from the rather-incredible dept

Today, as you may have heard, is Internet Slowdown Day, in which a bunch of folks are calling attention to the fight at the FCC concerning net neutrality. The basic idea -- as you may have seen on this very site -- is to host some "spinning wheel" banners, highlighting the kind of internet that we may have to live with if the big broadband providers get their way and are allowed to set up tollbooths online, picking winners and losers based on who will pay the most. We've been hearing that the big broadband players are a bit nervous about this -- as often seems to happen when it comes to real grassroots efforts. They've attempted to set up some fake grassroots efforts. We've even heard rumors that they've been trying to "infiltrate" planning meetings for Internet Slowdown Day. But this one takes the cake. In response to this campaign, cable's main lobbying arm, NCTA, has launched an advertising campaign that... um... looks kinda like the Internet Slowdown Day campaign, reminding people that they're nervous about Big Cable cutting off access. Here are two of the ads NCTA is currently running:

Of course, if you look at those ads, they actually (1) look like they're a part of Internet Slowdown Day and (2) remind people of exactly what they fear most about Big Cable: the inability to connect to certain sites. No one (and I do mean no one) thinks that, if the FCC implements true open internet rules, they'll suddenly be "unable to connect" to any particular sites. The only place where that's a fear is if the FCC doesn't put in place good rules and allows companies, like the cable companies NCTA represents, to start blocking access to certain sites.

So, either this a case where some ad designer at NCTA is a subversive double agent really helping "Team Internet," or the folks at NCTA and Big Cable are really so buried in their own wonkdom, they don't realize just how much this ad appears to support the other team. Either way, thanks, Big Cable and your lobbyists for highlighting exactly what most of us fear. An internet where we are "unable to connect" to sites because the FCC has killed off net neutrality...